James Cooke is a principal analyst with Nucleus Research in Boston, covering supply chain planning software. He was previously the editor of CSCMP?s Supply Chain Quarterly and a staff writer for DC Velocity.
Next month, representatives of major world governments will gather at the Climate Control Conference in Copenhagen, Denmark, in what some see as a "make or break" attempt to negotiate a global climate treaty. They will discuss ways to advance the Kyoto Protocol, a treaty to curb emissions of greenhouse gases, a treaty that has been signed by more than 180 nations (although the United States isn't one of them), a treaty that runs out in 2012.
Although the upcoming summit has dominated the headlines, it's just one of many looming eco-initiatives that could change the way distribution executives do their jobs. Regardless of what happens in Copenhagen, it's likely that U.S. companies next year will face some type of legislative or industry mandate to begin reducing emissions of a key greenhouse gas—carbon dioxide (CO2)—in their distribution operations. (Distribution operations are liable to be targeted because supply chains account for an estimated 30 percent of those emissions in the United States.)
What should distribution managers keep an eye out for? First, there's the legislative push in the current Congress to adopt a "cap and trade" system much like the one many European nations have already put in place to comply with the Kyoto Protocol. Under cap and trade, a company or industry is given a permit to give off a quota of carbon dioxide. If it stays below its quota, a company can sell its unused allowances to a company that's exceeding its quota, enabling it to avoid fines.
Back in June, the U.S. House of Representatives narrowly passed the American Clean Energy and Security Act of 2009—legislation that would not only establish a cap-and-trade program but would also mandate that by 2020, the United States must reduce the amount of CO2 in the nation's atmosphere by 17 percent from 2005 levels. Action on a companion bill awaits in the Senate.
Since industry and conservative groups have raised objections to the legislation (including the fact that the other top producers of greenhouse gases, China and India, have not yet committed to reducing their own emissions), the bill's fate is uncertain. However, there will be a push for federal regulatory action, since the U.S. Supreme Court two years ago ruled that the Environmental Protection Agency (EPA) has the authority to regulate greenhouse gases under the Clean Air Act. This fall, the EPA proposed greenhouse gas rules for factories, oil refineries, and power plants. Many Washington observers expect the agency to put forward similar CO2 emissions rules for trucks and automobiles in 2010.
Sizing the carbon footprint
But it isn't just the federal government that's pushing for restrictions on carbon dioxide emissions. There's also a private initiative under way by Wal-Mart Stores Inc. that would force suppliers to clean up their act.
This past summer, the retail giant announced that it would begin developing a sustainability index, with the eventual goal of creating environmental labels for all products sold in its stores. The index would measure a product's carbon footprint along with a number of other environmental attributes like the amount of water used to create it and the volume of solid waste generated in its production. The retailer plans to fund a university consortium to develop the label along with related metrics (although when it comes to measuring the carbon generated during manufacturing and distribution, it plans to piggyback on work already being done in the United Kingdom by the Carbon Trust). As a first step, this fall Wal-Mart surveyed its top 100,000 suppliers to find out whether they had instituted reduction targets for greenhouse gases. If your company is a supplier to Wal-Mart, you'll likely be mandated at some point to show you're doing something to combat global warming.
Although the details regarding compliance—whether with federal laws, federal regulations, or an industry mandate—are still being worked out, it's virtually certain that transportation will be targeted for greenhouse gas reductions. Some clues as to what managers might eventually be required to do can be gleaned from the experience of yogurt maker Stonyfield Farm of Londonderry, N.H.
Putting CO2 out to pasture
An organic foods producer with a longstanding commitment to sustainable practices, Stonyfield Farm hasn't been waiting around for government or industry mandates. It has already launched a companywide initiative to reduce its carbon footprint. In the area of finished-goods transportation, for example, Stonyfield Farm has set an ambitious goal of cutting greenhouse gas emissions to 40 percent of its 2006 baseline by the year 2014. In the first year of its program, the company achieved a significant reduction in CO2 emissions just by managing its private fleet and for-hire carriers more efficiently. Through better planning and equipment utilization, it was able to reduce both the number of trips made and miles traveled, with a corresponding reduction in emissions.
More recently, the company has been looking at shifting freight from road to rail and at incorporating more-efficient equipment into its private fleet. But even that may not be enough. Although these initiatives are producing measurable savings, Stonyfield Farm believes it will have to do still more if it expects to reach its long-term goals. The company is now preparing to take a hard look at its entire supply chain network, modeling the location of plants and distribution centers with the aim of minimizing shipping distances.
Stonyfield Farm's experience suggests that other companies too will have to step back and evaluate their entire supply chain operation in order to achieve meaningful reductions in CO2 emissions. Actions like buying hybrid-diesel engine trucks will help, but most businesses won't reach exacting targets without a holistic network approach.
Given the current concern about global warming, distribution managers need to start thinking about how they can reduce greenhouse gas emissions associated with inbound and outbound transportation. In the past, companies optimized their distribution operations around cost and service. Now, however, the optimization equation will require a third variable: carbon dioxide emissions.
Distribution managers can expect "carbon mapping" exercises to become a routine part of their job—just like freight bill auditing or issuing requests for proposals. With more and more folks concerned about what's blowing in the wind, both here and around the world, next year will be the year in which managers are asked to do their part to cut back on CO2.
With the economy slowing but still growing, and inflation down as the Federal Reserve prepares to lower interest rates, the United States appears to have dodged a recession, according to the National Retail Federation (NRF).
“The U.S. economy is clearly not in a recession nor is it likely to head into a recession in the home stretch of 2024,” NRF Chief Economist Jack Kleinhenz said in a release. “Instead, it appears that the economy is on the cusp of nailing a long-awaited soft landing with a simultaneous cooling of growth and inflation.”
Despite an “eventful August” with initial reports of rising unemployment and a slowdown in manufacturing, more recent data has “calmed fears of a deteriorating U.S. economy,” Kleinhenz said. “Concerns are now focused on the direction of the labor market and the possibility of a job market slowdown, but a recession is far less likely.”
That analysis is based on data in the NRF’s Monthly Economic Review, which said annualized gross domestic product growth for the second quarter has been revised upward to 3% from the original report of 2.8%. And consumer spending, the largest component of GDP, was revised up to 2.9% growth for the quarter from 2.3%.
Compared to its recent high point of 9.1% in July of 2022, inflation is nearly back to normal. Year-over-year growth in the Personal Consumption Expenditures Price Index – the Fed’s preferred measure of inflation – was at 2.5% in July, unchanged from June and only half a percentage point above the Fed’s target of 2%.
The labor market “is not terribly weak” but “is showing signs of tottering,” Kleinhenz said. Only 114,000 jobs were added in July, lower than expected, and the unemployment rate rose to 4.3% from 4.1% in June. Despite the increase, the unemployment rate is still within the normal range, Kleinhenz said.
“Now the guessing game begins on the magnitude and frequency of rate cuts and how far the federal funds rate will be reduced,” Kleinhenz said. “While lowering interest rates would be good news, it takes time for rate reductions to work their way through the various credit channels and the economy as a whole. Consequently, a reduction is not expected to provide an immediate uplift to the economy but would stabilize current conditions.”
Going forward, Kleinhenz said lower rates should benefit households under pressure from loans used to meet daily needs. Lower rates will also make it more affordable to borrow through mortgages, home improvement loans, car loans, and credit cards, encouraging spending and increasing demand for goods and services. Small businesses would also benefit, since lower intertest rates could lower their financing costs on existing loans or allow them to take out new loans to invest in equipment and plants or to hire more workers.
The global air cargo market’s hot summer of double-digit demand growth continued in August with average spot rates showing their largest year-on-year jump with a 24% increase, according to the latest weekly analysis by Xeneta.
Xeneta cited two reasons to explain the increase. First, Global average air cargo spot rates reached $2.68 per kg in August due to continuing supply and demand imbalance. That came as August's global cargo supply grew at its slowest ratio in 2024 to-date at 2% year-on-year, while global cargo demand continued its double-digit growth, rising +11%.
The second reason for higher rates was an ocean-to-air shift in freight volumes due to Red Sea disruptions and e-commerce demand.
Those factors could soon be amplified as e-commerce shows continued strong growth approaching the hotly anticipated winter peak season. E-commerce and low-value goods exports from China in the first seven months of 2024 increased 30% year-on-year, including shipments to Europe and the US rising 38% and 30% growth respectively, Xeneta said.
“Typically, air cargo market performance in August tends to follow the July trend. But another month of double-digit demand growth and the strongest rate growths of the year means there was definitely no summer slack season in 2024,” Niall van de Wouw, Xeneta’s chief airfreight officer, said in a release.
“Rates we saw bottoming out in late July started picking up again in mid-August. This is too short a period to call a season. This has been a busy summer, and now we’re at the threshold of Q4, it will be interesting to see what will happen and if all the anticipation of a red-hot peak season materializes,” van de Wouw said.
The report cites data showing that there are approximately 1.7 million workers missing from the post-pandemic workforce and that 38% of small firms are unable to fill open positions. At the same time, the “skills gap” in the workforce is accelerating as automation and AI create significant shifts in how work is performed.
That information comes from the “2024 Labor Day Report” released by Littler’s Workplace Policy Institute (WPI), the firm’s government relations and public policy arm.
“We continue to see a labor shortage and an urgent need to upskill the current workforce to adapt to the new world of work,” said Michael Lotito, Littler shareholder and co-chair of WPI. “As corporate executives and business leaders look to the future, they are focused on realizing the many benefits of AI to streamline operations and guide strategic decision-making, while cultivating a talent pipeline that can support this growth.”
But while the need is clear, solutions may be complicated by public policy changes such as the upcoming U.S. general election and the proliferation of employment-related legislation at the state and local levels amid Congressional gridlock.
“We are heading into a contentious election that has already proven to be unpredictable and is poised to create even more uncertainty for employers, no matter the outcome,” Shannon Meade, WPI’s executive director, said in a release. “At the same time, the growing patchwork of state and local requirements across the U.S. is exacerbating compliance challenges for companies. That, coupled with looming changes following several Supreme Court decisions that have the potential to upend rulemaking, gives C-suite executives much to contend with in planning their workforce-related strategies.”
Stax Engineering, the venture-backed startup that provides smokestack emissions reduction services for maritime ships, will service all vessels from Toyota Motor North America Inc. visiting the Toyota Berth at the Port of Long Beach, according to a new five-year deal announced today.
Beginning in 2025 to coincide with new California Air Resources Board (CARB) standards, STAX will become the first and only emissions control provider to service roll-on/roll-off (ro-ros) vessels in the state of California, the company said.
Stax has rapidly grown since its launch in the first quarter of this year, supported in part by a $40 million funding round from investors, announced in July. It now holds exclusive service agreements at California ports including Los Angeles, Long Beach, Hueneme, Benicia, Richmond, and Oakland. The firm has also partnered with individual companies like NYK Line, Hyundai GLOVIS, Equilon Enterprises LLC d/b/a Shell Oil Products US (Shell), and now Toyota.
Stax says it offers an alternative to shore power with land- and barge-based, mobile emissions capture and control technology for shipping terminal and fleet operators without the need for retrofits.
In the case of this latest deal, the Toyota Long Beach Vehicle Distribution Center imports about 200,000 vehicles each year on ro-ro vessels. Stax will keep those ships green with its flexible exhaust capture system, which attaches to all vessel classes without modification to remove 99% of emitted particulate matter (PM) and 95% of emitted oxides of nitrogen (NOx). Over the lifetime of this new agreement with Toyota, Stax estimated the service will account for approximately 3,700 hours and more than 47 tons of emissions controlled.
“We set out to provide an emissions capture and control solution that was reliable, easily accessible, and cost-effective. As we begin to service Toyota, we’re confident that we can meet the needs of the full breadth of the maritime industry, furthering our impact on the local air quality, public health, and environment,” Mike Walker, CEO of Stax, said in a release. “Continuing to establish strong partnerships will help build momentum for and trust in our technology as we expand beyond the state of California.”
That result showed that driver wages across the industry continue to increase post-pandemic, despite a challenging freight market for motor carriers. The data comes from ATA’s “Driver Compensation Study,” which asked 120 fleets, more than 150,000 employee drivers, and 14,000 independent contractors about their wage and benefit information.
Drilling into specific categories, linehaul less-than-truckload (LTL) drivers earned a median annual amount of $94,525 in 2023, while local LTL drivers earned a median of $80,680. The median annual compensation for drivers at private carriers has risen 12% since 2021, reaching $95,114 in 2023. And leased-on independent contractors for truckload carriers were paid an annual median amount of $186,016 in 2023.
The results also showed how the demographics of the industry are changing, as carriers offered smaller referral and fewer sign-on bonuses for new drivers in 2023 compared to 2021 but more frequently offered tenure bonuses to their current drivers and with a greater median value.
"While our last study, conducted in 2021, illustrated how drivers benefitted from the strongest freight environment in a generation, this latest report shows professional drivers' earnings are still rising—even in a weaker freight economy," ATA Chief Economist Bob Costello said in a release. "By offering greater tenure bonuses to their current driver force, many fleets appear to be shifting their workforce priorities from recruitment to retention."